October 16, 2014

The Consumer Financial Protection Bureau Student Loan Ombudsman has released a report highlighting complaints by struggling private student loan borrowers who describe being driven into default. Distressed borrowers report that they receive very little information or help when they get in trouble, that there are no affordable loan modification options available, and that the alternatives to default are temporary at best.

"We are hearing from consumers that they are driven into default because private student loan companies are not providing concrete loan modification options," said CFPB Director Richard Cordray. "Struggling private student loan borrowers are finding themselves out of luck and out of options. Lenders and servicers must redouble their efforts to deal with these distressed borrowers."

The report analyzes more than 5,300 private student loan complaints between Oct. 1, 2013, and Sept. 30, 2014, an increase of 38 percent over the previous year. It highlights that many consumers expressed a commitment to repaying their loans, if they could qualify for a payment plan that reflected their current financial circumstances. But, instead, many of these borrowers are being driven to default because no viable repayment options are available to them.